EY’s Industry Focus event on Manufacturing, held in collaboration with The Malta Chamber of Commerce, Enterprise and Industry, provided current sector leaders with insights into the current state of affairs. The event and its expert speakers also delved into how Covid-19 pandemic, logistics challenges, sustainability considerations, trade tensions, conflict, inflation, and commodity shortages are forcing manufacturers to rethink their strategies and supply chains.
EY outlined the results from the Future of Manufacturing Survey carried out in March among leaders from local manufacturing firms, which was presented by Chris Naudi, Tax Partner, and Simon Barberi, Strategy and Transactions Director.
The biggest impacts on their business over the next 12-18 months include increases in materials, freight costs and labour shortages. On the other side of the spectrum, nearly three-fourths believe COVID-19 effects on demand for their products will be minimal to non-existent.
Impact on business over next 12-18 Months (Top 3)
The biggest challenges for their businesses over the next 12-18 months include difficulties in sourcing materials, increases in material and component costs, and labour shortages in the Maltese market. Material and component costs have increased at a higher rate than freight costs, while labour costs have increased the least for the sector.
Employee attrition into the Government and public sector is nearly as high as the rate of attrition into other manufacturing and related sectors, while the construction sector attracts the lowest number of manufacturing employees when leaving their companies.
When it comes to companies moving towards more sustainable activities, over half stated they need financial support or guidance to make this transition.
Firms were also asked about the recent FATF grey listing of Malta, which saw 70% state that their investment decisions have not been affected by the grey listing.
Marisa Xuereb, President of The Malta Chamber, providing her insights on the recent supply chains issues facing Malta, said: “Due to the current crisis, manufacturing companies need to make changes in their processes practically every day which requires a great deal of agility, but we also need to consider to what extent this situation offers some opportunities. The country also needs to be realistic about what is behind the rising energy costs, which were already rising before the conflict in Ukraine erupted. We need to invest in energy efficiency and renewables here on the island but be prepared for a green transition that will be costly.”
Building on the survey results, George Panagiotopoulos, Associate Partner, Consulting, Supply Chain & Operations, EY Greece, provided international context around the issues being faced. Mr Panagiotopolous said: “Although an increasing number of unexpected disruptions are hitting supply chains and impacting overall business performance, these external pressures are driving a shift towards more sustainable business practices. Manufacturers who invest in capability now for their people, ways of working and digital adoption, will be best poised for recovery and create long term resiliency. This resiliency will be achieved through people empowerment and accelerating the move to zero touch operations.”
A panel discussion Moderated by Ediana Guillaumier EY People Advisory Services Lead Lead, delved deeper into the issues. The panel featured; Fersun Akyuz, General Manager, CMA CGM; Brian Muscat, General Manager, Multi Packaging Limited & The Malta Chamber, Chairperson of the Manufacturing and Other Industries Economic Group; Martin Hignett, Managing Director, Trelleborg Sealing Solutions Malta; and Chris Balzan, Associate Partner, Assurance, EY Malta.
Finally, the event was closed off by Dr Marthese Portelli, CEO of The Malta Chamber: “The manufacturing industry is one of the most resilient industries even when faced with multiple barriers, impediments and difficulties which could not have been foreseen or anticipated. The industry is experiencing an exorbitant increase in costs and this poses a serious threat to our competitiveness. Over the past 2 weeks the industry has seen an additional increase of 180 euros per trailer each way, whether it is full or empty. And this on top of the astronomical increase in shipping costs experienced over the last couple of months. Profitability and sustainability of these increased costs are at stake. There also remains the possibility that over time inflationary pressures in consumer markets will also lead to a contraction of demand, which is the stagflation scenario that most of Europe is fearing.”